NEWS

High bar” for award of “exceptional circumstances” costs

Ferri v McGill [2019] EWHC 952 (QB)

The claim was initially run under the pre-action protocol for low value personal injury road traffic accidents. After settlement (pre-issue) the claimant sought more than fixed costs. The rules mandate fixed costs in Protocol cases, subject only to allocation to multi-track or exceptional circumstances (r. 45.29J). At first instance the Master allowed an escape from fixed costs by setting a ‘low bar’ for exceptionality, finding that circumstances took the case out of the general run of cases which the Portal was intended to cover.

The Defendant appealed, and the test of exceptionality was (re)affirmed as a high one, the Judge stating that “policy reasons … in fixed costs [cases] …, while allowing for ‘exceptional circumstances’ to depart from the regime, require a more strict, not a ‘low bar’, approach”.

The case has been sent back to be reassessed by another Master.

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Part 36 offer is valid

Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754

Two questions arose on appeal: (1) was a Part 36 offer invalidated by inclusion of a counterclaim yet to be pleaded?; and (2) did the inclusion of a term as to interest (8% per annum after expiration of the offer) render the Offer invalid?

The Court of Appeal found that it did not matter that the counterclaim had not been pleaded. The Court noted that the purpose of Part 20 is to enable counterclaims to be managed effectively and conveniently. Nothing exempts counterclaims from the provisions of Part 36. A proposed counterclaim is treated as a claim for the purposes of Part 36.

Part 36.7 provides that a Part 36 offer can be made at any time, including before the commencement of proceedings. Therefore, the offer could not be invalid because the counterclaim had not been pleaded.  To rule otherwise would mean that a defendant would have to go to the expense of pleading a counterclaim in order to make a Part 36 offer.

The inclusion of a term as to interest after the end of the Relevant Period did not invalidate the offer (although Part 36 offers will be treated as inclusive of interest until the Relevant Period expires).

Court can make costs orders in foreign currency

Cathay Pacific Airlines Ltd v Lufthansa Technik AG (2019) EWHC 715 (Ch)

The court has jurisdiction under s.51 of the Senior Courts Act 1981 and Part 44.2 to make a costs order in a foreign currency. There is no basis for reading into the court’s wide costs discretion a restriction that an award must be in sterling. The costs of a failed summary judgment application were assessed in the Defendant’s favour in the sum of €25,000.

Notice should be given, where summary assessment is sought in a foreign currency, together with a figure representing the sterling equivalent. There is no prescribed way to give this information – it may be by way of form N260 (statement of costs), written submissions and, if appropriate, by way of a witness statement.

Disapplication of QOCS for failure to pay trial fee

Bruce and Bruce-Daly v Thomas Cook Tour Operations (Unreported)

QOCS (Qualified One-way Costs Shifting) provides that a bona fide, losing claimant will not have to bear a defendant’s costs unless the defendant can satisfy one of the exceptions in the CPR.

In this case, the Claimants, relying on the Package Travel Regulations 1992, brought proceedings for breach of contract. In the course of the claim the Claimants’ solicitors ceased acting and, from that point onwards, the Claimants failed to comply with directions which resulted in the claim being struck out due to the Claimants’ failure to pay the trial fee. 

On the issue of costs, the Defendant submitted that QOCS should be disapplied on the basis that the Claimants’ conduct generally, including non-payment of the trial fee, had obstructed the just disposal of proceedings. The Judge considered that the Claimants’ conduct, in failing to comply with court orders coupled with the failure to pay the trial fee, was sufficient for the exception at CPR 44.15 to apply and the Judge disapplied QOCS and awarded the Defendant its full costs.

Proposal to extend the fixed costs scheme

A consultation, that fixed costs (i.e. where the amount of costs recoverable at the end of a case is fixed by Rule rather than assessed by court) should apply to most civil cases worth up to £100,000, will end on 6 June 2019.

Clinical negligence cases and claims in the business and property courts are excluded from the proposals, but all other civil claims in the fast track are intended to come into scope. The proposals take forward recommendations made two years ago by Lord Justice Jackson, who advocated fixed costs for all fast-track cases and a new ‘intermediate track’ for certain claims up to £100,000. It is not proposed to bring forward a new track but it is proposed that the fast-track be extended.

As the MoJ considers that Part 36 works well (encouraging settlement by applying higher costs where an offer is made but not beaten at trial) it is proposed that there should be a 35% uplift on fixed costs in Part 36 cases.

Fixed costs at present

This may be an opportune time to recap the existing regime in Part 45 of the Civil Procedure Rules which provides for fixed recoverable costs in:

  • Section I – proceedings in which early judgment is entered
  • Section II  – costs only proceedings or approval of settlement in RTA cases where agreed damages do not exceed £10,000, and to which neither Section III nor Section IIIA applies
  • Section III – claims pursued under the Pre-Action Protocols for Low Value PI Claims in RTA and Low Value PI (Employers’ Liability and Public Liability) Claims.  Essentially, personal injury claims valued at up to £25,000.
  • Section IIIA – claims which started under the above protocols but exited them (because liability was not admitted) provided the claim is not allocated to the multi-track
  • Section IV  – proceedings in the Intellectual Property Enterprise Court
  • Section V – County Court claims conducted by officers of HM Revenue and Customs
  • Section VI  – which fixes the costs for fast track trials
  • Section VII – Aarhus Convention claims.

Third party funding – “Arkin” cap disapplied – Funder held liable for Defendants’ costs

Davey v Money and others [2019] EWHC 997 (Ch)

The Court considered the application of the “Arkin” cap to limit the extent of a non-party costs order.

The “Arkin” cap, from the Court of Appeal decision in Arkin v Borchard Lines Ltd [2005], limits the amount payable by a litigation funder to the other side to an amount equal to the sum funded. The basis of the “Arkin” cap is access to justice (i.e. by not deterring commercial funders) balanced against the competing principle that ‘costs follow the event’.

The Court disapplied the “Arkin” cap stating that, on the facts of the case, the balance between the principle that the successful party should have its costs, and enabling commercial funders to continue to provide finance to facilitate access to justice, should be struck differently than it was in Arkin.

The Court ordered the Funder to pay all of the Defendants’ costs on the indemnity basis from the date of the funding agreement.

While the “Arkin” cap has often been criticised as being too far in the favour of the funder it has, to date, been readily adopted by the commercial funding industry. This may now change.

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Issues-based costs order: only where an issue on which the successful claimant lost “so starkly stands out as being separate”


Canary Wharf (BP4) T1 Limited and others v European Medicines Agency [2019] EWHC 921 (Ch)

The Court considered whether it could make an issues-based costs order, i.e. an order in favour of the winning party in respect of issues won and countervailing in respect of issues lost.
The Court noted that in any litigation, but especially in complex commercial litigation, any winning party is likely to fail on one or more (often intertwined) issues. The Court found that “unless there is an issue which so starkly stands out as being separate and on which [the Claimant] lost, [it] should not make an issues-based costs order”.
The Court found only one issue which stood out so as to justify an issues-based order and, as a result, reduced the recoverable costs by 15%.

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Budgeting and Proportionality

Red & White Services Limited v Phil Anslow Limited [2018] EWHC 1699 (Ch)

Costs may be disproportionate where it will cost significantly more to fight than a party stands to recover. One test is whether the trial is likely to be an end in itself or merely part of the process of arguing who should pay (all or most of) the costs. Where costs exceed quantum it will often be the latter, and costs may be disproportionate.

While the dispute was not simply as to money, the claim having a higher value and greater significance than that shown only by the quantum of damages, the issues in the case did not justify disproportionate costs nor the very substantial differences between the parties’ budgets (a party’s disproportionately low budget is not an appropriate yardstick to assess another party’s higher budget).

The Judge considered the matters in issue and used his own experience to arrive at a reasonable and proportionate figure.

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